12 September 2014

IFC to issue first retail green bond

The World Bank's IFC plans to close a green bond on Monday, in a new type of issue designed for retail clients.

The bond, which is being underwritten by Incapital, is the first green bond to be issued under the IFC's Impact Notes programme, which was launched in March 2014 to attract retail investors and small brokerages.

IFC plans to be the first issuer to regularly offer green bonds to individual investors in the US.

On Friday, it had already attracted more than $5 million of orders, but more were expected in coming days, Louise Herrle, managing director of capital markets at Incapital told Environmental Finance.

"We are seeing more demand from retail accounts in this space and it's a natural fit for green bonds," she added.

The 10-year bond is callable after three years. It has a 'step-up' structure to its coupon, ranging from 2% to 8%. This means that the coupon will start at 2% and then rise to 2.5% after three years, to 3% after five years, to 4% after seven years, to 6% after nine years, and to 8% after 10 years.

The proceeds of the bond will be invested in renewable energy and energy efficiency projects in developing countries. Criteria for the projects are independently verified by the Center for International Climate and Environmental Research Oslo.

There has been more than $60 million of IFC Impact Notes sold since the initiative's launch.

The bond is similar in structure to a $12 million 10-year bond issued last month by the World Bank and sold to private clients of Merrill Lynch.

Peter Cripps